Why Companies Waste Billions on Innovation

Do you think companies spend too much time searching for groundbreaking innovations at the expense of incremental advances?

CESARE MAINARDI: Forget incremental versus groundbreaking–the real problem is that companies are spending billions of dollars and not getting results. Our “Global Innovation 1000” report found that spending reached an all-time high of $600 billionin 2012 among the top 1,000 spenders. But only a quarter of them say they’re highly effective at innovation.
Why? Because so many of the things organizations do just don’t deliver results. Companies need to move from brainstorming, benchmarking and blue oceans to approaches that reflect how we really create new ideas and how innovation really happens.

Know exactly where you need to innovate most.

The best innovators know they are truly world-class in a few differentiating capabilities, and that’s where they innovate. They invest and constantly push the envelope here because it creates the most value for their company. So if you know your company – and exactly the problem you’re trying to solve – then you can produce high-return innovation.

Innovation is nothing more than new combinations of old elements.

Henry Ford invented the high-volume auto business when he saw how cattle moved from butcher to butcher in a slaughterhouse, learned that black paint dries the fastest, read about employee profit sharing from John Stuart Mills, and adopted the Singer Sewing Co.’s dealer franchise model. Look across industries, history, the world, and even non-business domains to spark a creative combination.

Crack the “innovation immune system” in your organization.

Starbucks almost never became our “third place.” The owners refused to implement this idea and it only happened when the employee who had the idea bought the company. Every true innovation will collide with strong antibodies. Innovation happens only when those who can make an idea happen are central to generating it in the first place.

Companies can get a much higher return on the billions spent on innovation–whether groundbreaking or incremental. But only if they are willing to change the way they do it.